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2005-08-28 04:00:00 PDT Sacramento -- State air quality regulators, in an abrupt reversal that has delighted environmentalists but could cost taxpayers hundreds of millions of dollars, have proposed new rules that would effectively force Bay Area public transit systems to ditch diesel buses.

A leading critic of the move, AC Transit, which serves 230,000 riders a day in the East Bay, has spent $120 million to overhaul its fleet of diesel buses in an effort to improve air quality and would have to pay a steep price to purchase new natural-gas-powered vehicles to comply.

The rules would mandate that by 2007, all state transit agencies buy or lease only alternative-fuel buses.

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Officials with the transit agency question the timing of the proposed change, which came as a top supplier of vehicular natural gas made a hefty donation to Gov. Arnold Schwarzenegger, who appoints members of the state Air Resources Board.

A spokeswoman for the governor denied any link between the contribution and the proposed policy, and environmentalists say California's bus fleets need to be weaned off diesel, long considered a major pollutant.

At issue is a long-simmering dispute over how best to reduce pollution from California's public transportation fleets. In 1999, the air board required that transit agencies reach a zero-emission standard by 2010. But it left open the question of which fuel the agencies could use to get there -- natural gas or diesel.

Many public transit agencies, including most of those in the Bay Area, chose the diesel route, believing improvements in diesel fuel standards and technology would enable them to comply. But environmentalists say they have seen nothing so far to indicate that diesel technology will ever be able to power buses as cleanly as natural gas.

The state air board could soon render the debate moot. The issue, which is to be voted on by the air board Sept. 15, has set off alarms at both the California Transit Association and Alameda County Transit.

The proposal came just weeks after Texas oil mogul T. Boone Pickens and a vehicular natural gas company he founded donated $100,000 to Schwarzenegger's political campaign committee, the California Recovery Team.

"Why would they do this to a bunch of public transit operations?" asked Jim Gleich, the deputy general manager of AC Transit, the state's third largest public transit system, with more than 600 diesel buses in its fleet. "It's money."

He called it "a greedy grab by the natural gas industry."

Critics say the timing of the proposal -- coming so close on the heels of the campaign donation -- smacks of the kind of "pay to play" conduct that Schwarzenegger's predecessor, Gray Davis, was accused of.

"It's a very big concern of mine," Gleich said. "It seems kind of clear what's happened. And (Schwarzenegger) said he would do something different."

Katherine McLane, a spokeswoman for the governor, said the air board is independent and "to suggest undue influence is absolutely ludicrous."

In a memo to regional transit districts, Josh Shaw, executive director of the California Transit Association, said he was told by administration officials that "Gov. Schwarzenegger and his closest policy advisers are considering unveiling a new fuel strategy and policy for the whole state," effectively eliminating diesel use in public transit, and moving "to natural gas as the state's priority fuel."

The memo also noted the liquefied natural gas lobby is "very well represented in the governor's administration."

Jerry Martin, a spokesman for the air board, said that allowing diesel fuel has always been controversial and that reverting to a strict natural gas requirement has always been an option. Though previous boards rejected such a mandate, he noted that Schwarzenegger has replaced five of the 11 board members, "so this gives a new board an opportunity to make a decision about that issue."

Martin could not offer specifics about the internal process that led to the proposal's appearance on the September agenda but said: "As for pressure from the governor's office, I know of none."

Diesel exhaust is a major source of particulate pollution, which can cause respiratory and heart problems. The air board says diesel soot is responsible for 70 percent of the state's cancer risk from airborne poisons.

The controversy emerged earlier this year as the air board aimed to discuss how state and federal standards on air emission could be better coordinated for public transit systems.

Elimination of diesel systems was not raised in recent Air Resources Board workshops, which were held to discuss proposed regulatory changes that would be considered at its July board meeting.

But on May 20 -- just three days after the pair of donations from Pickens and his energy company -- the air board postponed that scheduled meeting until September.

The board's own documents show its first proposal concerning air emissions standards in May did not call for a recommended elimination of diesel use. But when the new agenda was released July 29, it contained a proposal that read: "require all transit agencies to purchase/lease only alternative fuel buses."

On May 16 of this year, Clean Energy -- a company based in Seal Beach (Orange County) that is the largest provider of vehicular natural gas for transportation fleets in North America -- gave $50,000 to Schwarzenegger's California Recovery Team. The next day, Pickens, who is also a board member of the company, donated another $50,000.

Neither Pickens nor Clean Energy had ever donated money before to any other state-level California politician, according to records with the secretary of state's office dating to 1999.

Marty Wilson, a fundraiser and political adviser to the governor, said the contributions paid for Pickens' attendance at a Schwarzenegger fundraiser held in Dallas in May.

Calls to Clean Energy Fuels were not returned to The Chronicle on Friday.

In July, public transportation officials said they were shocked when they first saw the rewritten proposal, which contained an entirely new push to eliminate diesel.

Rentschler, of the Metropolitan Transportation Commission, said that's because officials thought the issue had been settled in 1999.

"The air board offered us an option six years ago, and we chose that option -- which included clean diesel and demonstration programs for zero emission buses," he said. "An agreement is an agreement. We've invested tens of millions in this effort, and it would cost us hundreds of millions of dollars."

AC Transit's Gleich said retrofitting the fleet for natural gas would cost $62 million -- and the operating costs would be $25 million a year or 10 percent more than they are today.

It's unclear whether the proposed rule would affect San Francisco Muni's effort to bring hybrid diesel buses into its fleet. Forcing Muni to convert to natural gas-powered buses isn't practical, said Maggie Lynch, a spokeswoman for the transit agency.

"We've tested natural gas. They break down twice as often as diesel, and they don't work on our hills," she said.

Environmentalists defend the choice of natural gas over diesel, noting that despite advances in diesel fuel quality and technology, natural gas remains a cleaner burning fuel that discharges fewer particulates and other pollutants.

"There's a huge benefit to keeping alternative fuel" as a competitor to diesel, said Todd Campbell, the policy director for the Coalition for Clean Air, based in Los Angeles. "It's the only thing that has driven diesel closer to zero."

Mass transit and the diesel controversy

The problem: Diesel exhaust is a major source of particulate pollution that can trigger respiratory and heart problems; the state air board says diesel soot is responsible for 70 percent of the state's cancer risk from airborne poisons.

The current law: Transit agencies must have zero emissions by 2010, but diesel fuel is allowed.

The proposal: Transit agencies would be banned from adding diesel buses by 2007.

The progress: San Francisco Muni's diesel fleet is 540 buses. About 150 are pre-1991 and are slated for replacement by 2007. In the East Bay, AC Transit has more than 600 diesel buses in its fleet. The agency has spent $120 million in an effort to decrease emissions.